US Dollar slips vs yen as Kuroda keeps market guessing on policy

Tokyo-Japan (Sept 5)  The dollar sagged against theyen on Monday after Bank of Japan Governor Haruhiko Kurodadisappointed some investors who were looking for clearer hintson the chances of more BOJ easing this month.

The dollar, which stood near 104.00 yen ahead of Kuroda'scomments, fell to 103.52 yen at one point and was last tradingat 103.64 yen , down 0.3 percent on the day.

The greenback had set a five-week high of 104.32 yen onFriday, after disappointing U.S. job figures did little tochange investors' perception that the Federal Reserve is likelyto raise interest rates in coming months.

The dollar has since pulled away from that peak as viewsgrow that a September hike is less likely than one in December.

Kuroda signalled his readiness to ease monetary policyfurther using existing or new tools, shrugging off growingmarket concerns that the bank is reaching its limits after analready massive stimulus programme.

He also stressed the BOJ's comprehensive assessment of itspolicies later this month won't lead to a withdrawal of easing. The yen rose, however, as his comments disappointed some whowere looking for more explicit hints on the chances of the BOJaggressively easing policy at its next review on Sept. 20-21,traders said.

"There were probably some hopes for something a little morespecific," said Shinsuke Sato, head of FX trading group forSumitomo Mitsui Banking Corporation in Tokyo.

While the dollar could retreat further against the yen fornow, the greenback will probably hold firm ahead of the Fed'spolicy meeting this month and its downside is fairly limited,helped by potential unwinding of yen-bullish bets, Sato said.

Data from the U.S. Commodity Futures Trading Commissionreleased on Friday showed that currency speculators were netlong the yen in the week ended Aug. 30. The dollar's index against a basket of six major currencies stood at 95.721 , managing to stay above aone-week low of 95.189 set on Friday just after the U.S.payrolls data.

Nonfarm payrolls rose by 151,000 jobs last month, the U.S.Labor Department reported on Friday, below the 180,000 jobs thateconomists had expected. Yet, with the average payroll increase over the last threemonths handily topping 200,000, investors concluded that thedata would not be a serious blow to the Fed's plan to raiseinterest rates.

"The market's reaction is perfectly understandable. Whilethe headline figure was weak, the data did not completely ruleout the possibility of a rate hike in September," said MasashiMurata, senior currency strategist at Brown Brothers Harriman.

The euro edged up 0.1 percent to $1.1167, but was notvery far from Wednesday's three-week low of $1.1123.

There was limited reaction to the defeat of GermanChancellor Angela Merkel's Christian Democrats in a localelection on Sunday.

CDU were beaten into third place after not only SocialDemocrats but also the anti-immigrant and anti-Islam Alternativefor Germany (AfD) party in an election in her home district ofMecklenburg-Vorpommern. The defeat, coupled with another drubbing that looms in twoweeks in Berlin, is casting an ominous shadow over theChancellor's hopes of winning - or even running - for a fourthterm in 2017. "In the long run, this could become a really big story,towards the German general election next year. If there arefears that countries like Germany and France want to exit theeuro, talk of euro zone break-up may be rehashed for instance,"Junya Tanase, chief currency strategist at JPMorgan Chase Bank.

A two-day summit of leaders from G20 nations that began onSunday in China has so far produced little in the way ofmarket-moving headlines. U.S. president Barack Obama describedhis meeting with Chinese President Xi Jinping as "extremelyproductive".

Source: KitcoNews